Margo Company uses the periodic inventory method and had the following inventory information available: Units Unit Cost Total Cost 1/1 Beginning Inventory 100 $4 $ 400 1/20 Purchase 400 $5 2,000 2,400 1,400 $6,200 10/20 Purchase 300 $8 $7 7/25 Purchase 200 1,000 Additional information: 650 units were sold initially but there was sales return of 250 and later 200 units sold.
Margo Company uses the periodic inventory method and had the following inventory information available: Units Unit Cost Total Cost 1/1 Beginning Inventory 100 $4 $ 400 1/20 Purchase 400 $5 2,000 2,400 1,400 $6,200 10/20 Purchase 300 $8 $7 7/25 Purchase 200 1,000 Additional information: 650 units were sold initially but there was sales return of 250 and later 200 units sold.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter8: Inventories: Special Valuation Issues
Section: Chapter Questions
Problem 2RE: Black Corporation uses the LIFO cost flow assumption. Each unit of its inventory has a net...
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Required:
Answer the following independent questions and show all computations supporting your answers.
a) Assume that the company uses the FIFO method. The value of the ending inventory at
December 31 is $__________.
b) Assume that the company uses the LIFO method. The value of the ending inventory on
December 31 is $__________.
c) Determine the difference in the amount of income that the company would have reported if it
had used the FIFO method instead of the LIFO method. Would income have been greater or
less? Which method would provide more tax advantage? -Explain your rationale.
Transcribed Image Text:Question-2
Margo Company uses the periodic inventory method and had the following inventory information
available:
Units
Unit Cost
Total Cost
1/1
Beginning Inventory
100
$4
$ 400
1/20
Purchase
400
$5
$8
$7
2,000
2,400
1,400
$6,200
10/20
7/25
Purchase
300
Purchase
200
1,000
Additional information: 650 units were sold initially but there was sales return of 250 and later
200 units sold.
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